CBO Says 2013 U.S. Budget Deficit Estimated at $642 Billion
Published May 14, 2013
Dow Jones Newswires
The Congressional Budget Office said Tuesday the federal deficit is expected to shrink to $642 billion in the fiscal year that ends Sept. 30, down sharply from last year because of higher taxes and other revenues collected by the government.
CBO's projections were markedly different from the $845 billion deficit it projected in February, something the agency attributed to higher-than-expected tax receipts and large projected dividend payments to the government from Fannie Mae (FNMA) and Freddie Mac (FMCC).
The deficit for fiscal year 2013 is projected to be just 4.0% of gross domestic product, CBO said, higher than historical averages but down from 7.0% in 2012 and 10.1% in 2009.
The CBO projected a deficit of $560 billion, or 3.4% of GDP in fiscal 2014, and a deficit of $378 billion, or 2.1% of GDP in 2015.
The narrowing deficit has near-term implications for policy makers. It is expected to delay a showdown over whether to raise the government's debt ceiling beyond the summer. Treasury Secretary Jacob Lew said earlier this week that the government had enough room to continue borrowing money until at least Labor Day, and some analysts have said the rosier fiscal picture could push decisions back until October.
The White House and several budget think tanks have said the deficit should be somewhere below 3% of GDP, but many Republicans have said policy makers should strive to eliminate the deficit entirely.
CBO said that a number of factors, including lower projections on Medicare, Medicaid and Social Security spending, had led it to significantly lower its projections for cumulative deficits over the next 10 years. CBO on Tuesday estimated the total gap between government spending and revenue from 2014 until 2023 would be $6.3 trillion, which was $618 billion less than it projected in February.
Still, CBO said current law wouldn't lead to a meaningful reduction in the deficit on its own. It said that while the deficit is shrinking, federal debt held by the public will "remain above 70% of GDP--far higher than the 39% average seen over the past four decades."
CBO said the debt-to-GDP ratio in 2013 could hit 75.1%, then dip in the next few years before rising again to 73.6% in 2023.
"Such high and rising debt later in the coming decade would have serious negative consequences," CBO said, saying federal spending on interest payments could rise, among other things.
Write to Damian Paletta at firstname.lastname@example.org
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